...occurrence of drought, heavy and scanty rainfall is seen. As a result agriculture output becomes very irregular and this entails heavy losses not only to the farming community but also to the related industries. Although there is no way to control weather, there exists a new solution to the financial effect that weather can have on the incomes of economic agents of developed and emerging economies. There are number of instruments and tools available for management of weather risk. Weather risk management is a definitive guide to the rapidly expanding WRM market. It is the most dynamic sector of the financial arena and is drawing the interest of the companies that are seeking to protect against the financial impact of non catastrophic weather. So for hedging weather risk weather derivatives have been developed. DERIVATIVE TRADING Like any other derivatives weather derivatives are structured as Future, Option or swaps based on different weather indices. Usually most weather derivative transactions are done on over the SInternational Financial Future Option Exchange (LIFFE) offer standardized weather contracts. In India derivative instruments are traded both on OTC market and derivative exchanges. OTC contracts such as forward and swaps are bilaterally negotiated between two parties.OTC terms are flexible and customized. In India OTC derivatives are generally prohibited with some exceptions. An exchange traded contract such as future has a standardized format that specifies ...
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...Traditional VS Islamic Financial Derivatives To: Prof. Naser Abu Mustafa By: Mwaffaq Al Jayousi & Mohammad Al Shdooh Abstract This study focuses the light on defining financial derivatives and briefly describe their different types (Options, Forwards, Futures, Swaps, etc.). At the same time it tries to find if these financial derivatives exists in the Arab world, how they are implemented, and if we have an Islamic alternatives for them. Introduction There is a big debate in the Arab world regarding the usage of financial derivatives, Wither they are legal according to Islam or not, and If they are illegal in Islam; are there any Islamic alternatives to them. First we have to ask our self: Is there any need to use derivatives? And why they recently became so popular in the western countries? The need for financial derivatives emerges when people realize that there must be a way to reduce the risk associated with the trading of different kinds of goods. Risks such as price fluctuations and the uncertainty about the future market conditions. And since there are some people who are willing to bear this risk instead of us, this market took off and recently because of the communications revolution it flourished. Then why these financial derivatives did not reach the Arab world? The answer is simply because they hugely rely on speculations and anticipation; which are considered illegal according to Islam. But someone can ask: if it is illegal in Islam, then how come we...
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...EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR AGRICULTURE AND RURAL DEVELOPMENT Directorate L. Economic analysis, perspectives and evaluations L.5. Agricultural trade policy analysis Brussels, July 2008 High prices on agricultural commodity markets: situation and prospects A review of causes of high prices and outlook for world agricultural markets This working document does not necessarily represent the official views of the European Commission High prices on agricultural commodity markets: situation and prospects Contents 1. 2. 3. 4. EXECUTIVE SUMMARY ......................................................................................... 3 INTRODUCTION AND STOCKTAKING................................................................ 4 FACTORS BEHIND INCREASING PRICES ........................................................... 6 TEMPORAL DIMENSION OF FACTORS: TEMPORARY OR STRUCTURAL......................................................................................................... 11 4.1. Changes in agricultural production and trade due to physical characteristics of production ........................................................................... 11 4.2. Economic parameters ...................................................................................... 14 4.2.1. 4.2.2. 4.2.3. 4.2.4. 4.3.1. 4.3.2. 4.3.3. 4.3.4. 4.3.5. Population and income growth.......................................................... 14 Price of crude oil and related costs.......
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...Executive summary Table of contents Introduction: Intro of derivatives to SA fin markets The South African futures market started informally on an over the counter basis in 1987 and Rand Merchant Bank fulfilled the clearing house role (Alexander: 1996). According to Alexander, the Johannesburg Stock Exchange (JSE) together with commercial banks combined to set up a formal futures exchange and the South African Futures Exchange (SAFEX) exchange was eventually formed and opened for business on 30 April 1990. The Johannesburg Stock Exchange’s equity derivative section began operating in 1990 facilitating the trading of financial derivatives to the open market (Adelegan, 2009). Options’ contract trading was initiated in October 1992 and futures on agricultural commodities were available by 1995. In May 1996 the system of automated trading was fully introduced to the Futures exchange (Adelegan, 2009). The main reasons behind the establishment of the derivative market in South Africa were to increase liquidity, improve level of risk management as well as to allow the local market to tackle challenges arising as a result of globalization (Adelgan, 2009). Two broad categories exist in the derivatives market and these are futures and options and these two categories a variety of instruments can be found which include single stock futures, warrants, financial and commodity futures (Adelegan, 2009). Findings: Warrants Warrants Warrants were first launched in South Africa in 1997...
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...the price of wheat rose sharply in 2007, as have other commodities, such as corn, since that year. The rise in price is due to two main reasons including the drought in Australia and ethanol production in the United States. Since then, the price for wheat has dropped almost close to its original price to $4.00 per bushel. Competitive forces make it difficult for the company to change pretzel bag prices and so to mitigate price risk, Brian Conrad, who runs the Fleetwood Mill, will try his luck dealing with wheat futures contracts through the Chicago Board of Trade. For July 2013 Brian will strategize to forward contract with some farmers and hedge the rest on the Chicago Board of Trade. This report will specifically focus on wheat price analysis and the prices Brian should expect, with this in consideration what flour price he should quote to the pretzel company, a and lastly, advantages and disadvantages of contracting with area wheat farmers and hedging using futures...
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...Singapore operations managed effectively? The answer to these and similar questions would be indeed interesting and insightful in analyzing the debacle of Baring Bank. Reported on very widely in the nineteen- nineties, this bank collapse still holds significant lessons for those involved in the management of financial institutions. The objective here is not to prove definitively the exact cause of the collapse but to show, by way of a very narrow discussion, how certain deficiencies in internal controls and risk management systems impacted the bank and ultimately led to its collapse. When Barings collapsed it had a capital of approximately $600 million. Contrast this with notional futures position of Japanese equity and interest rates of $27 billion, Nikkei 225 equity contracts of $20 billion and put and call options with nominal values of over $6 billion that the bank held. Given the level of capital it is incomprehensible that the bank could have created this level of exposure. It is certainly worth asking where were the mechanism and limits that should...
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...[pic] CHAPTER – I GRAND PROJECT ON CURRENCY DERIVATIVES NANCY SHAH – PROJECT TRAINEE CHAPTER 2 INTRODUCTION TO CURRENCY MARKETS 2.1 BASIC FOREIGN EXCHANGE DEFINITIONS Spot: Foreign exchange spot trading is buying one currency with a different currency for immediate delivery. The standard settlement convention for Foreign Exchange Spot trades is T+2 days, i.e., two business days from the date of trade. Forward Outright: A foreign exchange forward is a contract between two counterparties to exchange one currency for another on any day after spot. In this transaction, money does not actually change hands until some agreed upon future date. The duration of the trade can be a few days, months or years. For most major currencies, three business days or more after deal date would constitute a forward transaction Base Currency / Terms Currency: In foreign exchange markets, the base currency is the first currency in a currency pair. The second currency is called as the terms currency. Exchange rates are quoted in per unit of the base currency. E.g. The expression US Dollar–Rupee, tells you that the US Dollar is being quoted in terms of the Rupee. The US Dollar is the base currency and the Rupee is the terms currency. Exchange rates are constantly changing, which means that the value of one currency in terms of the other is constantly in flux. Changes in rates are expressed as strengthening or weakening of one currency vis-à-vis the other currency...
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...Contract Specifications Contents 2 4 10 11 12 Overview Futures TAPOs (Traded Average Price Options) Traded options LMEminis 1 Overview The London Metal Exchange (LME) is the world’s premier industrial metals market – more than two thirds of global non-ferrous futures and options trading is conducted on the LME. The price derived from trading is used as a reference price in the majority of the world’s physical metal markets. Located in the City of London, the LME’s membership is global, with more than 95% of the business conducted on its markets coming from outside the United Kingdom. The Exchange provides three core services which underpin all activity; • • • Pricing Hedging Physical delivery (the LME acts as a market of last resort) The market itself can be accessed via three different trading platforms, the Ring (open-outcry), LMEselect (electronic trading) and through 24-hour inter-office telephone trading. Prompt date/settlement (delivery) date summary for LME contracts The LME’s physical delivery model allows the Exchange to offer a unique prompt date structure for futures contracts which matches the requirements of physical industry for the pricing of physical material. A summary of this is shown below. (1) Weekly contract settlement takes place every Wednesday (2) Monthly contract settlement takes place every third Wednesday LME Aluminium and LME Copper Daily: Weekly (1): Monthly (2): Cash 4 months 7 months Cash 4 months 7 months...
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...11/19/2009 Economist.com Derivatives Over the counter, out of sight Nov 12th 2009 From The Econom ist print e dition Derivatives are extraordinarily useful—as well as complex, dangerous if misused and implicitly subsidised. No wonder regulators are taking a close look Illustration by Otto Dettmer IN 1958 American onion farmers, blaming spec ulators for the volatility of their crops’ prices, lobbied a congressman from Michigan named Gerald Ford to ban trading in onion futures. Supported by the president-to-be, they got their way. Onion futures have been prohibited ever since. Futures are agreements to trade something at a set price at a given date. They are perhaps the simplest example of a derivative, a contract whose value is “derived” from the price of a c ommodity or another asset. Derivatives c ontinue to be vilified, usually when someone loses a lot of money. Orange County and Procter & Gamble lost fortunes on them in the 1990s. They were at the core of Enron’s failure. And in September 2008 they brought American International Group (AIG), a mighty insurer, to its knees. Its fetish for credit default swaps (CDSs), a type of derivative that insures lenders against borrowers’ going bust, led it to guarantee at least $400 billion-worth of other c ompanies’ loans—inc luding those of Lehman Brothers. The Americ an government forked out $180 billion to save AIG from collapse. Every catastrophe brings c alls for restrictions on derivatives. This year Joseph Stiglitz...
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...To explain the roll cost, every day roughly one twentieth of VXX holdings in the near month futures contracts are sold and replaced with the same amount of next month futures. Most of the time, the near month future is at a lower value than the next month because investors tend to expect hell to break loose in the future, not tomorrow. For example, today, July expiration future is $20.21 and August expiration future is $21.69 so there is a 7.3% premium on August. Since every day we pay more to replace the futures contracts with new futures contracts, we are paying this roll cost. Futures prices change wildly every day but imagine If the futures values did not change for an entire month, you would lose 7% of your investment. If you don't know anything about it, that's an excellent reason not to own it. "Invest in what you know" is pretty universal investment advice. I'll do the same, copy and paste to my MS Word and then try to comprehend. To think that I averaged a 3.78 GPA and actually two 4.0s in my micro/macro economy & Global Economy, and to find that I need more time to remember and understand alll these, it's depressing. My mental judgment tells me that you know what you are saying. Thank you. (That still I´m not) you don´t need to be a PhD in Economics (even as having one can help): you DO need a lot of PATIENCE, you need a discipline of reading everyday A LOT about global economic & political news (discarding the garbage from real-value information), you...
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...Passion for Learning Helping Kids Become Amazing Students CASE SUBMISSION 3 Presented to Professor Ganesh N. Prabhu [pic] Indian Institute of Management, Bangalore On July 26, 2011 Submitted By Case Group – 2J: Arit Kumar Mondal 1011084 Rajarshi Sarma 1011194 Nirupam Das 1011258 TOY DISTRIBUTION INDUSTRY IN USA The toy distribution industry in USA is dominated by top five retailers (50% market share). Sales are seasonal towards the last quarter of the calendar year. The industry is attractive and the per capita contribution to toys is increasing. There has been a growing interest in the educational toys segment where educational value is the primary purchase driver. DIRECT MAIL INDUSTRY In 1993, over 40% of the Americans used mailed catalogs for purchases. Catalog consumers were well educated and had high incomes. Catalog sales were driven by mailing size, response rate & average order amount. Volume discounts, coupons & free gifts served as incentives. New products were extremely important in children’s catalog. CHALLENGES FOR PASSION FOR LEARNING (PFL) PFL’S market positioning is of a direct-mail company offering 100% educational products for 6-12 year old children. Its first catalog mail in 1994 resulted in a disappointing response rate of 0.77% which resulted in a loss of $145000 on revenues of $54000. There was also increasing competition from specialty chains...
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...Commodities Trading: Nick Leeson, Internal Controls and the Collapse of Barings Bank __________________________________________________________________________________________ Commodities Trading: Nick Leeson, Internal Controls and the Collapse of Barings Bank By Sam Bhugaloo Page 1 of 21 Commodities Trading: Nick Leeson, Internal Controls and the Collapse of Barings Bank __________________________________________________________________________________________ Table of Content Introduction.................................................................................................................................3 Background and Overview… ......................................................................………… ........ .....4 Barings Bank...............................................................................................................................5 Internal Controls at Barings Bank.............................................................................................13 Lessons Learned and Steps Taken to Preclude Recurrences . ..................................................15 Conclusion ................................................................................................................................18 References.................................................................................................................................20 Page 2 of 21 Commodities Trading: Nick Leeson, Internal Controls and...
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...respect of a term loan, ii. the account remains ‘out of order’ as indicated at paragraph 2.2 below, in respect of an Overdraft/Cash Credit (OD/CC), iii. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted iv. the installment of principal or interest thereon remains overdue for two crop seasons for short duration crops, v. the installment of principal or interest thereon remains overdue for one crop season for long duration crops, vi. the amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitization transaction vii. in respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment. 3. Banks should, classify an account as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter. Out of Order: An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit/drawing power, but there are no credits continuously for 90 days as on the date of Balance Sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as 'out...
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...Grade Details - All Questions | 1. | Question : | (TCO C) Blease Inc. has a capital budget of $625,000, and it wants to maintain a target capital structure of 60 percent debt and 40 percent equity. The company forecasts a net income of $475,000. If it follows the residual dividend policy, what is its forecasted dividend payout ratio? (a) 40.61% (b) 42.75% (c) 45.00% (d) 47.37% (e) 49.74% | | | | Instructor Explanation: | Answer is: d Text: pp. 570-572 - Residual Dividends, Chapter 14 Capital budget $625,000 Equity ratio 40% Net income (NI) $475,000 Dividends paid = NI - (Equity ratio)(Capital budget) $225,000 Dividend payout ratio = Dividends paid/NI 47.37% | | | | Points Received: | 10 of 10 | | Comments: | | | | 2. | Question : | (TCO F) Chocolate Factory's convertible debentures were issued at their $1,000 par value in 2009. At any time prior to maturity on February 1, 2029, a debenture holder can exchange a bond for 25 shares of common stock. What is the conversion price, Pc? (a) $40.00 (b) $42.00 (c) $44.10 (d) $46.31 (e) $48.62 | | | | Instructor Explanation: | Answer is: a Chapter 19: pp. 770-774 Par value: $1,000.00 Conversion ratio: 25.00 Conversion price = Par value/Conversion ratio = $40.00 | | | | Points Received: | 10 of 10 | | Comments: | | | | 3. | Question : | (TCO B) Ang Enterprises has a levered beta of 1.10, its capital structure consists of 40 percent debt...
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...I feel as though the information that I received by doing the Career Interest Profiler will help me with my future planning, by allowing me to analyze things that best fit what the profiler has suggested for me. The profiles showed me that things that I would never have pictured myself being involved with previously are obtainable goals now. It also allows me to see things that although I didn’t think I was a good fit for before, I now know that I am and would be more willing to pursue those options moving forward in my development. I will think more clearly about the position and choices that are put before me so that I can use the skills that I have and am obtaining to highlight myself in a particular area of interest. Rather it is with my current employer or for a new industry or field of interest. The Competencies that were revealed to me in the assessment also helps me in my future of decision making by allowing to know what areas I should most apply myself in. Many times it is asked, “what do you prefer to work on in this project?” and many times I didn’t have any answer, now I am able to identify my qualities and move in the direction that best suit my abilities to perform at the expected level. Knowing my competencies also helps me to confirm with others what I am “sure” I am capable of handling. Being able to approach the situation with my best foot forward will show an employer or potential client that I am very competent to handle the situation. While working on a...
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